What is Dual Currency Investment (DCI)?

IntermediateNov 21, 2022
Earn regardless of the market direction
What is Dual Currency Investment (DCI)?

If you want to monetize your market sentiment while hedging market prices with additional interest, you should take a look into Gate.io’s Dual Currency product. This article will help you better understand all the mechanisms to make the most of our product and benefit from it, starting from the basics and then analyzing the pros and cons.

What is a Dual Currency Product

A dual currency product (or dual currency investment) is, as its name suggests, a short-term investment product that uses two different cryptocurrencies. It is a non-principal protected wealth management product with a floating return, meaning that the returns change according to established benchmarks known as “linked prices.”

Dual Investment offers you the chance to purchase or sell cryptocurrencies at the price and time of your choosing in the future while still receiving a high-interest income regardless of how the market performs.

So in short, it allows you to deposit a cryptocurrency and earn a yield based on two assets. Commit your crypto assets, lock in a yield and earn value if your committed assets’ value increases. The return you get depends upon the outcome of your bet at the expiry date.

The value of assets is constantly fluctuating in the crypto market. By choosing a certain product with the intent of hitting the predetermined benchmark for a profit in one of the product’s currencies, a subscriber can take advantage of this behavior while using a Dual Currency product. Additionally, the returns would differ and be in a different currency if the benchmark were missed.

For instance, the Settlement Currency for a BTC dual currency goods purchased with BTC might either be BTC or USDT, subject to the Settlement Price. You will receive the return in USDT if the Settlement Price is higher than the Linked Price; in the event that it is lower than the Linked Price, you will receive it in BTC.

Note: Once the subscription is initiated, the investor cannot cancel or initiate early redemption until the maturity date.

When Should I Use a Dual Currency Product?

Here are some use case scenarios for you:

  • Take profit: To realize some of your investment profits and have access to higher interest yield, sell your crypto holding at a Target Price;
  • Buy Low: Buy cryptocurrency at a Target Price when the market is down to benefit from higher interest yields by “buying the dips”;
  • Grow more cryptocurrency: You already possess cryptocurrency, and you want to continue to profit from it;
  • Increase your stablecoin bags: You now possess stablecoins and wish to continue to profit from them.

Terminology

You must comprehend a few terms before we look at some examples.

  • Investment Currency: The dual investment product’s currency is known as the investment currency. Bitcoin’s value is correlated with the price of BTC/USDT in Dual Currency - BTC, and investors can invest using either currency.
  • Settlement Currency: Settlement Currency is the money you’ll get when the product expires. The outcome of the settlement price in relation to the linked price determines the settlement currency. It might be either BTC or USDT for BTC.
  • Date of Maturity: This is the Dual Currency Product’s Expiry Date or the day your investment product is resolved.
  • Target price or linked pricing: The benchmark price, known as “Linked Price”, is what’s used to decide what currency your returns will be in. The Settlement Price will be calculated using this benchmark price on Expiry Day. I.e., the product will be settled in Investment Currency (in this case, BTC) if the Settlement Price is lower than the Linked Price; otherwise, it will be settled in USDT.
  • Annual percentage yield (APY): The interest you would receive if you locked your cryptocurrency in a Dual Investment product for a year, including compound interest, is known as the annual percentage yield (APY). If your APY is 36,5%, for instance, an estimate of your daily effective return would be 36,5% / 365 days, or 0.1 percent.

Pros & Cons

Like any other financial instrument, dual investment also has its pros and cons. It can be a double-edged sword, so before investing, fully understand its potential, but also its risks. Once you are familiar with them, you will be ready to use the dual currency product! Let’s recap the pros and cons in the list below.

Advantages

  • Opportunity to earn high yields
  • Provides hedging opportunities
  • Great way to earn passive income no matter which direction the market goes
  • Flexibility: Investors have the flexibility to determine the pre-agreed strike level that expresses their market view and desired risk return characteristics

Risks

  • During the term of your subscription, you are unable to withdraw your assets, therefore you are sacrificing some liquidity.
  • If the price significantly rises or falls above/below the strike price (depending on the product), you’d be better off simply holding your assets instead of using Gate Dual Currency Product.

Conclusion

In conclusion, this is an interesting product that lets investors earn interest while taking risks they feel comfortable with.

The emergence of the dual currency product has opened up crypto markets for the world to invest in. As it attracts more investors, the concept of dual currency investment is fairly practiced by all major exchanges.

If you are looking for a product that allows you to earn passive income and high interest rates, while being able to choose variable time ranges (short periods / long periods), this product is definitely for you.

How to Invest Dual Currency Product

To view the Dual Currency Product page, log in to Gate.io, hover your cursor over “Earn” in the navigation bar and click “Dual Currency Product”, as follows:

Now you can see the list of Dual Currency Products with product details. You can choose between BTC and ETH sections (and also a Recommended section made for you). Select a product by clicking on “Purchase”:

Author: Piero
Translator: Joy
Reviewer(s): Mauro, Edward, Joyce
* This article represents only the views of the observers and does not constitute any investment suggestions.
*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all other cases, legal action will be taken due to copyright infringement.